April 20, 2024

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[THE INVESTOR] South Korea’s state financial watchdog on March 30 announced a special audit of Samsung BioLogics, following allegations of accounting fraud to show a surprise profit ahead of its listing last year.

The Financial Supervisory Service’s decision to carry out a detailed audit of the contract drug-making unit of Samsung comes as lawmakers suggested that having been unprofitable for years it reported a net profit in 2015 based on a revaluation of its holdings in affiliate Samsung Bioepis. 

“We have found some discrepancies in Samsung BioLogics’ audit reports after reviewing them in accordance with the opinion of civil groups and political parties,” an official at the FSS said.

The company has denied the allegations, saying its stake ownership was included in its net profit as a one-time event after Bioepis’ status changed from a subsidiary to an affiliate under the International Financial Reporting Standards adopted by the country.

It posted a net profit of 1.9 trillion won (US$1.70 billion) in 2015 following four consecutive loss-making years since starting operations in 2011.

The listing of Samsung BioLogics in November last year was the second largest on record and raised 2.25 trillion won.

In response, Samsung BioLogics said it “hasn’t been formally notified of a special audit by the FSS,” on its website.

“If an additional audit is carried out, we will work diligently in accordance with established laws and procedures. We expect that the appropriateness of the accounting practice will be clarified during the investigation,” it said.

By Park Han-na (hnpark@heraldcorp.com)